FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Former Officers and Investor in Houston Company in Fraudulent Penny Stock Scheme
The Securities and Exchange Commission today charged two former officers of now-defunct PGI Energy, Inc., as well as an investor in the company, for their roles in a fraudulent penny stock scheme to issue purportedly unrestricted PGI Energy shares in the public markets.
The SEC's complaint, filed in U.S. District Court for the Southern District of Texas, alleges that starting in 2011, PGI Energy's former Chief Investment Officer Robert Gandy and former CEO and Chairman Marcellous McZeal engaged in a scheme that included creating false promissory notes, signing misleading certifications, and altering the company's balance sheet to cause its transfer agent to issue millions of PGI Energy common stock shares without restrictive legends. The SEC also charged investor Alvin Ausbon for his role in the scheme, which included signing false promissory notes and diverting proceeds from the sale of PGI Energy stock back to the company and Gandy.
Gandy is also the CEO of Houston-based Pythagoras Group, which purports to be an "investment banking firm." McZeal is an attorney licensed in Texas. The complaint alleges that Gandy and McZeal made material misstatements and provided false documents to attorneys and a transfer agent who relied on them to conclude that PGI Energy shares could be issued without restrictive legends. The SEC alleges that Gandy and McZeal backdated promissory notes that purported to memorialize debt supposedly owed by PGI Energy and a prior business venture. They also are alleged to have added false debt to PGI Energy's balance sheet, and signed bogus "gift" letters and certifications of non-shell status, all in an effort to get unrestricted, free-trading PGI Energy shares unlawfully released into the market. Ausbon is charged with furthering the scheme by signing bogus promissory notes and remitting proceeds from the sale of PGI Energy shares back to the company and Gandy.
According to the complaint, the scheme collapsed in February 2012 when the SEC ordered a temporary suspension of trading in PGI Energy's securities, due to questions regarding the accuracy and adequacy of the company's representations in press releases and other public statements.
The SEC's complaint charges all defendants with violating Sections 5 and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, a financial penalty, and penny stock bars against all three defendants and officer and director bars against Gandy and McZeal.
Without admitting or denying the allegations in the SEC's complaint, McZeal has consented to the entry of a final judgment enjoining him from future violations of Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. He has also agreed to pay disgorgement plus prejudgment interest thereon of $19,919.37 and a civil penalty of $70,000. In addition, McZeal has agreed to permanent officer and director and penny stock bars. This settlement is subject to court approval. Subject to final settlement of the district court proceeding, McZeal has also agreed to the institution of a settled administrative proceeding pursuant to Rule 102(e) of the SEC's Rules of Practice, pursuant to which he would be barred from appearing before the SEC as an attorney.
Tuesday, August 6, 2013
VAN ALLEN SPEED
FROM: LOS ALAMOS NATIONAL LABORATORY
Van Allen Probes Pinpoint Driver of Speeding Electrons
Research team solves decades-old mystery that threatens satellites
LOS ALAMOS, N.M., July 25, 2013—Researchers believe they have solved a lingering mystery about how electrons within Earth’s radiation belt can suddenly become energetic enough to kill orbiting satellites. Thanks to data gathered from an intrepid pair of NASA probes roaming the harsh space environment within the Van Allen radiation belts, scientists have identified an internal electron accelerator operating within the belts.
"For years we thought the Van Allen belts were pretty well behaved and changed slowly," said Geoffrey Reeves of Los Alamos National Laboratory’s Intelligence and Space Research Division. "With more measurements, however, we realized how quickly and unpredictably the radiation belts change, and now we have real evidence that the changes originate from within the belts themselves."
In a paper released today in Science Express, Reeves and colleagues from the University of New Hampshire, University of Colorado at Boulder, NASA Goddard Flight Center, Aerospace Corporation, University of California-Los Angeles, and University of Iowa, describe a mechanism by which electrons suddenly accelerate to fantastic speeds within the Van Allen belts— a pair of donut shaped zones of charged particles that surround Earth and occupy the inner region of our planet’s Magnetosphere.
Traveling at 99 percent the speed of light, the super-fast electrons are among the speediest particles naturally produced by Earth, and have energies so high that they can penetrate and destroy satellite components. The research paves the way for scientists to possibly predict hazardous space weather and allow satellite operators to potentially prepare for the ravages of sudden space storms.
The radiation belts, named after their discoverer, James Van Allen, are comprised of an outer region of extremely high-energy electrons, with an inner region of energetic protons and electrons. The belts have been studied extensively since the dawn of the Space Age, because the high-energy particles in the outer ring can cripple or disrupt spacecraft. Long-term observation of the belts have hinted that the belts can act as efficient and powerful particle accelerators; recent observations by the Van Allen Probes (formerly known as the Radiation Belt Storm Probes)—a pair of spacecraft launched in August 2012—now seem to confirm this.
On October 9, 2012, while flying through the radiation belts, the Van Allen Probes measured a sudden, nearly thousand-fold increase in the energy of electrons within the outer belt. The rapid increase came on the heels of a period of waning energies the week before. The October 9 event mimicked an observed, but poorly understood event measured in 1997 by another spacecraft. Ever since the 1997 event, scientists have pondered whether the increase in electron energy was the result of forces outside of the belts, a mechanism known as "radial acceleration," or from forces within the belts, known as "local acceleration." Data from the Van Allen Probes seems to put this question to rest.
Because the twin Van Allen Probes follow each other and cut through the belts at different times, researchers were able to see that the October 9 increase originated from within the heart of the belts, indicative of local acceleration. The data also showed that higher electron fluxes did not move from a region outside of the belts slowly toward our planet, a detail corroborated by other geosynchronous satellites located outside of the belts.
"In the October 9, 2012, event, all of the acceleration took place in about 12 hours," said Reeves, a space physicist and principal author of the Science paper. "With previous measurement, a satellite might have only been able to fly through such an event once and not get a chance to witness the changes actually happening."
The researchers are now trying to understand exactly how the acceleration took place. Right now, the team believes that electromagnetic radio waves somehow excite the electrons into a higher-energy state, much like a microwave oven excites and heats water molecules. Members of the team are looking hard at waves known as "Chorus Waves" that are often observed in the region of the belts where the local acceleration was strongest. Chorus Waves are a type of electromagnetic radio wave with frequencies within the range of human hearing. Chorus Waves provide a haunting cacophony like a flock of extraterrestrial birds.
"We don’t know whether it is Chorus Waves or some other type of electromagnetic wave that’s behind the electron acceleration we are seeing," said Reeves, "but the Van Allen Probes are also equipped with instruments that should help us figure that out as well. Each of these discoveries take us a step closer to the goal of forecasting these extreme space weather events and making space safer for satellites."
Van Allen Probes Pinpoint Driver of Speeding Electrons
Research team solves decades-old mystery that threatens satellites
LOS ALAMOS, N.M., July 25, 2013—Researchers believe they have solved a lingering mystery about how electrons within Earth’s radiation belt can suddenly become energetic enough to kill orbiting satellites. Thanks to data gathered from an intrepid pair of NASA probes roaming the harsh space environment within the Van Allen radiation belts, scientists have identified an internal electron accelerator operating within the belts.
"For years we thought the Van Allen belts were pretty well behaved and changed slowly," said Geoffrey Reeves of Los Alamos National Laboratory’s Intelligence and Space Research Division. "With more measurements, however, we realized how quickly and unpredictably the radiation belts change, and now we have real evidence that the changes originate from within the belts themselves."
In a paper released today in Science Express, Reeves and colleagues from the University of New Hampshire, University of Colorado at Boulder, NASA Goddard Flight Center, Aerospace Corporation, University of California-Los Angeles, and University of Iowa, describe a mechanism by which electrons suddenly accelerate to fantastic speeds within the Van Allen belts— a pair of donut shaped zones of charged particles that surround Earth and occupy the inner region of our planet’s Magnetosphere.
Traveling at 99 percent the speed of light, the super-fast electrons are among the speediest particles naturally produced by Earth, and have energies so high that they can penetrate and destroy satellite components. The research paves the way for scientists to possibly predict hazardous space weather and allow satellite operators to potentially prepare for the ravages of sudden space storms.
The radiation belts, named after their discoverer, James Van Allen, are comprised of an outer region of extremely high-energy electrons, with an inner region of energetic protons and electrons. The belts have been studied extensively since the dawn of the Space Age, because the high-energy particles in the outer ring can cripple or disrupt spacecraft. Long-term observation of the belts have hinted that the belts can act as efficient and powerful particle accelerators; recent observations by the Van Allen Probes (formerly known as the Radiation Belt Storm Probes)—a pair of spacecraft launched in August 2012—now seem to confirm this.
On October 9, 2012, while flying through the radiation belts, the Van Allen Probes measured a sudden, nearly thousand-fold increase in the energy of electrons within the outer belt. The rapid increase came on the heels of a period of waning energies the week before. The October 9 event mimicked an observed, but poorly understood event measured in 1997 by another spacecraft. Ever since the 1997 event, scientists have pondered whether the increase in electron energy was the result of forces outside of the belts, a mechanism known as "radial acceleration," or from forces within the belts, known as "local acceleration." Data from the Van Allen Probes seems to put this question to rest.
Because the twin Van Allen Probes follow each other and cut through the belts at different times, researchers were able to see that the October 9 increase originated from within the heart of the belts, indicative of local acceleration. The data also showed that higher electron fluxes did not move from a region outside of the belts slowly toward our planet, a detail corroborated by other geosynchronous satellites located outside of the belts.
"In the October 9, 2012, event, all of the acceleration took place in about 12 hours," said Reeves, a space physicist and principal author of the Science paper. "With previous measurement, a satellite might have only been able to fly through such an event once and not get a chance to witness the changes actually happening."
The researchers are now trying to understand exactly how the acceleration took place. Right now, the team believes that electromagnetic radio waves somehow excite the electrons into a higher-energy state, much like a microwave oven excites and heats water molecules. Members of the team are looking hard at waves known as "Chorus Waves" that are often observed in the region of the belts where the local acceleration was strongest. Chorus Waves are a type of electromagnetic radio wave with frequencies within the range of human hearing. Chorus Waves provide a haunting cacophony like a flock of extraterrestrial birds.
"We don’t know whether it is Chorus Waves or some other type of electromagnetic wave that’s behind the electron acceleration we are seeing," said Reeves, "but the Van Allen Probes are also equipped with instruments that should help us figure that out as well. Each of these discoveries take us a step closer to the goal of forecasting these extreme space weather events and making space safer for satellites."
Monday, August 5, 2013
USDA'S ONGOING EFFORTS TO ASSIST DROUGHT IMPACTED RANCHERS
FROM: U.S. DEPARTMENT OF AGRICULTURE
USDA Announces Ongoing Efforts to Assist Ranchers Impacted by Drought
WASHINGTON, Aug. 5, 2013 - As severe drought conditions persist in certain regions throughout the country, the U.S. Department of Agriculture's (USDA) Farm Service Agency (FSA) Administrator Juan M. Garcia today announced temporary assistance to livestock producers through FSA's Conservation Reserve Program (CRP). Under limited conditions, farmers and ranchers affected by drought will be allowed to use certain additional CRP acres for haying or grazing under emergency conditions while maintaining safeguards to the conservation and wildlife benefits provided by CRP. In addition, USDA announced that the reduction to CRP annual rental payments related to emergency haying or grazing will be reduced from 25 percent to 10 percent. Further, the sale of hay will be allowed under certain conditions. These measures take into consideration the quality losses of the hay and will provide needed assistance to livestock producers.
"Beginning today, state FSA offices are authorized, under limited conditions, to expand opportunities for haying and grazing on certain additional lands enrolled in CRP," said Garcia. "This local approach provides both the appropriate flexibility and ability to tailor safeguards specific to regional conditions. States must adhere to specific guidelines to ensure that additional haying and grazing still maintains the important environmental and wildlife benefits of CRP. These safeguards will be determined through consultation with the state conservationist, state fish and wildlife agency and stakeholders that comprise the state technical committee."
CRP is a voluntary program that provides producers annual rental payments on their land in exchange for planting resource-conserving vegetation on cropland to help prevent erosion, provide wildlife habitat and improve the environment. CRP acres enrolled under certain practices can already be used for emergency haying and grazing during natural disasters to provide much-needed feed to livestock. FSA state offices have already opened haying, grazing or both in 432 counties in response to natural disaster this year.
Given the continued multi-year drought in some regions, forage for livestock is already substantially reduced. The action today will allow lands that are not typically eligible for emergency haying and grazing to be used with appropriate protections to maintain the CRP environmental and wildlife benefits. The expanded haying and grazing will only be allowed following the local primary nesting season, which already has passed in many areas. Especially sensitive lands such as stream buffers are generally not eligible.
FSA also has taken action under the Emergency Conservation Program to authorize additional expenditures related to drought response to be eligible for cost share, including connection to rural water systems and installation of permanent pipelines. In addition, given the limited budgetary resources and better long term benefits, FSA has increased the maximum cost share rates for permanent practices relative to temporary measures.
FSA encourages all farmers and ranchers to contact their local USDA Farm Service Agency Service Center to report damage to crops or livestock loss. In addition, USDA reminds livestock producers to keep thorough records of losses, including additional expenses for such things as feed purchased due to lost supplies.
USDA Announces Ongoing Efforts to Assist Ranchers Impacted by Drought
WASHINGTON, Aug. 5, 2013 - As severe drought conditions persist in certain regions throughout the country, the U.S. Department of Agriculture's (USDA) Farm Service Agency (FSA) Administrator Juan M. Garcia today announced temporary assistance to livestock producers through FSA's Conservation Reserve Program (CRP). Under limited conditions, farmers and ranchers affected by drought will be allowed to use certain additional CRP acres for haying or grazing under emergency conditions while maintaining safeguards to the conservation and wildlife benefits provided by CRP. In addition, USDA announced that the reduction to CRP annual rental payments related to emergency haying or grazing will be reduced from 25 percent to 10 percent. Further, the sale of hay will be allowed under certain conditions. These measures take into consideration the quality losses of the hay and will provide needed assistance to livestock producers.
"Beginning today, state FSA offices are authorized, under limited conditions, to expand opportunities for haying and grazing on certain additional lands enrolled in CRP," said Garcia. "This local approach provides both the appropriate flexibility and ability to tailor safeguards specific to regional conditions. States must adhere to specific guidelines to ensure that additional haying and grazing still maintains the important environmental and wildlife benefits of CRP. These safeguards will be determined through consultation with the state conservationist, state fish and wildlife agency and stakeholders that comprise the state technical committee."
CRP is a voluntary program that provides producers annual rental payments on their land in exchange for planting resource-conserving vegetation on cropland to help prevent erosion, provide wildlife habitat and improve the environment. CRP acres enrolled under certain practices can already be used for emergency haying and grazing during natural disasters to provide much-needed feed to livestock. FSA state offices have already opened haying, grazing or both in 432 counties in response to natural disaster this year.
Given the continued multi-year drought in some regions, forage for livestock is already substantially reduced. The action today will allow lands that are not typically eligible for emergency haying and grazing to be used with appropriate protections to maintain the CRP environmental and wildlife benefits. The expanded haying and grazing will only be allowed following the local primary nesting season, which already has passed in many areas. Especially sensitive lands such as stream buffers are generally not eligible.
FSA also has taken action under the Emergency Conservation Program to authorize additional expenditures related to drought response to be eligible for cost share, including connection to rural water systems and installation of permanent pipelines. In addition, given the limited budgetary resources and better long term benefits, FSA has increased the maximum cost share rates for permanent practices relative to temporary measures.
FSA encourages all farmers and ranchers to contact their local USDA Farm Service Agency Service Center to report damage to crops or livestock loss. In addition, USDA reminds livestock producers to keep thorough records of losses, including additional expenses for such things as feed purchased due to lost supplies.
JUSTICE DEPARTMENT SUBMITTED REMEDY TO SETTLE E-BOOK PRICE-FIXING CASE
FROM: U.S. DEPARTMENT OF JUSTICE
Remedy Would Require Apple to Terminate Agreements with Five Publishers; Provide for a Court-Appointed External Monitor; Allow Competitors to Provide Links from Their E-Book Apps to Their E-Bookstores
WASHINGTON — The Department of Justice and 33 State Attorneys General today submitted to the court a proposed remedy to address Apple Inc.’s illegal conduct, following the July 10, 2013, U.S. District Court for the Southern District of New York decision finding that Apple conspired to fix the prices of e-books in the United States. The proposed relief is intended to halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities.
“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”
The department's proposal, if approved by the court, will require Apple to terminate its existing agreements with the five major publishers with which it conspired – Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc. – and to refrain for five years from entering new e-book distribution contracts which would restrain Apple from competing on price. Under the department’s proposed remedy, Apple will be prohibited from again serving as a conduit of information among the conspiring publishers or from retaliating against publishers for refusing to sell e-books on agency terms. Apple will also be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content. To reset competition to the conditions that existed before the conspiracy, Apple must also for two years allow other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores, allowing consumers who purchase and read e-books on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.
Additionally, the Department of Justice is asking the court to appoint an external monitor to ensure that Apple's internal antitrust compliance policies are sufficient to catch anticompetitive activities before they result in harm to consumers. The monitor, whose salary and expenses will be paid by Apple, will work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee. The antitrust compliance officer will be responsible for training Apple’s senior executives and other employees about the antitrust laws and ensuring that Apple abides by the relief ordered by the court.
On April 11, 2012, the department filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, for conspiring to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.
At the same time that it filed the lawsuit, the department reached settlements with three of the publishers – Hachette, HarperCollins and Simon & Schuster. Those settlements were approved by the court in September 2012. The department settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013. The Penguin settlement was approved by the court in May 2013. Final approval of the Macmillan settlement is pending before the court. Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements.
The department's trial against Apple, which was overseen by Judge Denise Cote, began on June 3, 2013. The trial lasted for three weeks, with closing arguments taking place on June 20, 2013. The court issued its opinion that Apple Inc. violated Section 1 of the Sherman Act on July 10, 2013. The court will hold a hearing on remedies on Aug. 9, 2013.
Remedy Would Require Apple to Terminate Agreements with Five Publishers; Provide for a Court-Appointed External Monitor; Allow Competitors to Provide Links from Their E-Book Apps to Their E-Bookstores
WASHINGTON — The Department of Justice and 33 State Attorneys General today submitted to the court a proposed remedy to address Apple Inc.’s illegal conduct, following the July 10, 2013, U.S. District Court for the Southern District of New York decision finding that Apple conspired to fix the prices of e-books in the United States. The proposed relief is intended to halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities.
“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”
The department's proposal, if approved by the court, will require Apple to terminate its existing agreements with the five major publishers with which it conspired – Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc. – and to refrain for five years from entering new e-book distribution contracts which would restrain Apple from competing on price. Under the department’s proposed remedy, Apple will be prohibited from again serving as a conduit of information among the conspiring publishers or from retaliating against publishers for refusing to sell e-books on agency terms. Apple will also be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content. To reset competition to the conditions that existed before the conspiracy, Apple must also for two years allow other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores, allowing consumers who purchase and read e-books on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.
Additionally, the Department of Justice is asking the court to appoint an external monitor to ensure that Apple's internal antitrust compliance policies are sufficient to catch anticompetitive activities before they result in harm to consumers. The monitor, whose salary and expenses will be paid by Apple, will work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee. The antitrust compliance officer will be responsible for training Apple’s senior executives and other employees about the antitrust laws and ensuring that Apple abides by the relief ordered by the court.
On April 11, 2012, the department filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, for conspiring to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.
At the same time that it filed the lawsuit, the department reached settlements with three of the publishers – Hachette, HarperCollins and Simon & Schuster. Those settlements were approved by the court in September 2012. The department settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013. The Penguin settlement was approved by the court in May 2013. Final approval of the Macmillan settlement is pending before the court. Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements.
The department's trial against Apple, which was overseen by Judge Denise Cote, began on June 3, 2013. The trial lasted for three weeks, with closing arguments taking place on June 20, 2013. The court issued its opinion that Apple Inc. violated Section 1 of the Sherman Act on July 10, 2013. The court will hold a hearing on remedies on Aug. 9, 2013.
SATELLITE VIEW OF LOW PRESSURE SYSTEM OFF SOUTHEAST COAST OF AUSTRALIA
FROM: NASA
In late July 2013, a low pressure system off Australia’s southeast coast and moist onshore winds combined to create unsettled weather across central Australia – and a striking image of a broad cloud band across the stark winter landscape. The Moderate Resolution Imaging Spectroradiometer (MODIS) aboard NASA’s Terra satellite captured this true-color image on July 22 at 01:05 UTC (10:35 a.m. Australian Central Standard Time). To the west of the low pressure trough the skies are clear and dry. To the east, the broad band of bright white clouds obscures the landscape. The system brought wind, precipitation and cooler temperatures to the region. Image Credit: NASA/Jeff Schmaltz, MODIS Land Rapid Response Team, NASA GSFC
LABOR DEPARTMENT OBTAINS INJUNCTION AGAINST PENSION PLAN FIDUCIARIES
FROM: U.S. DEPARTMENT OF LABOR
US Labor Department obtains preliminary injunction against Kentucky-based plan fiduciaries, alleging improper use of retirement funds
LEXINGTON, Ky. — The U.S. District Court for the Eastern District of Kentucky on July 26 granted in part the U.S. Department of Labor's motion for a preliminary injunction against George S. Hofmeister and Bernard Tew, former fiduciaries of four Lexington-based pension plans: the Hillsdale Salaried, Hillsdale Hourly, Revstone Casting Fairfield GMP Local 359, and Fourslides Inc.
The department previously filed lawsuits in the same court that named Hofmeister and Tew, among others. Hofmeister was the trustee of the four pension plans, and Tew was managing director of their investment service provider, Bluegrass Investment Management LLC. The court's order removes Hofmeister as a fiduciary of the plans and prohibits him from taking any actions with respect to the pensions plans or their assets. Tew resigned as fiduciary of the plans a few days before a hearing regarding the department's motion.
The lawsuits alleged that the defendants engaged in a series of prohibited transactions resulting in the misuse of approximately $12.1 million from the Hillsdale Salaried pension plan, approximately $22.5 million from the Hillsdale Hourly pension plan, approximately $4.4 million from the Revstone Casting Fairfield GMP Local 359 pension plan, and approximately $500,000 from the Fourslides Inc. pension plan. The four plan sponsors are closely affiliated with Lexington-based Revstone Industries LLC and Spara LLC.
"Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money for their retirement," said Phyllis C. Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration. "Our aim is to make this right for those workers."
The suits follow an EBSA investigation that found violations of the Employee Retirement Income Security Act, including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to services providers, and payment of fees on behalf of the companies.
According to the brief filed on behalf of the department by the Cleveland Regional Solicitor's Office, Hofmeister, Tew and Bluegrass have repeatedly violated ERISA, using nearly $40 million in pension plan assets to benefit themselves or related parties.
The department's investigation of these pension plans revealed a pattern of prohibited transactions involving the use of these plans' assets by Hofmeister, Tew and investment adviser firms. Alleged improper use of the plans' assets began within days or months of Hofmeister assuming control of the pension plans. The department contends that Hofmeister has placed millions of dollars in pension plan assets at risk and has consistently failed to act to protect these assets when required.
The court has appointed Fiduciary Counselors Inc. to administer the four pension plans. Fiduciary Counselors is an investment adviser firm in Washington, D.C., that has extensive experience acting as an independent fiduciary for employee benefit plans.
US Labor Department obtains preliminary injunction against Kentucky-based plan fiduciaries, alleging improper use of retirement funds
LEXINGTON, Ky. — The U.S. District Court for the Eastern District of Kentucky on July 26 granted in part the U.S. Department of Labor's motion for a preliminary injunction against George S. Hofmeister and Bernard Tew, former fiduciaries of four Lexington-based pension plans: the Hillsdale Salaried, Hillsdale Hourly, Revstone Casting Fairfield GMP Local 359, and Fourslides Inc.
The department previously filed lawsuits in the same court that named Hofmeister and Tew, among others. Hofmeister was the trustee of the four pension plans, and Tew was managing director of their investment service provider, Bluegrass Investment Management LLC. The court's order removes Hofmeister as a fiduciary of the plans and prohibits him from taking any actions with respect to the pensions plans or their assets. Tew resigned as fiduciary of the plans a few days before a hearing regarding the department's motion.
The lawsuits alleged that the defendants engaged in a series of prohibited transactions resulting in the misuse of approximately $12.1 million from the Hillsdale Salaried pension plan, approximately $22.5 million from the Hillsdale Hourly pension plan, approximately $4.4 million from the Revstone Casting Fairfield GMP Local 359 pension plan, and approximately $500,000 from the Fourslides Inc. pension plan. The four plan sponsors are closely affiliated with Lexington-based Revstone Industries LLC and Spara LLC.
"Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money for their retirement," said Phyllis C. Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration. "Our aim is to make this right for those workers."
The suits follow an EBSA investigation that found violations of the Employee Retirement Income Security Act, including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to services providers, and payment of fees on behalf of the companies.
According to the brief filed on behalf of the department by the Cleveland Regional Solicitor's Office, Hofmeister, Tew and Bluegrass have repeatedly violated ERISA, using nearly $40 million in pension plan assets to benefit themselves or related parties.
The department's investigation of these pension plans revealed a pattern of prohibited transactions involving the use of these plans' assets by Hofmeister, Tew and investment adviser firms. Alleged improper use of the plans' assets began within days or months of Hofmeister assuming control of the pension plans. The department contends that Hofmeister has placed millions of dollars in pension plan assets at risk and has consistently failed to act to protect these assets when required.
The court has appointed Fiduciary Counselors Inc. to administer the four pension plans. Fiduciary Counselors is an investment adviser firm in Washington, D.C., that has extensive experience acting as an independent fiduciary for employee benefit plans.
FLORIDA RESIDENT CHARGED WITH UNREGISTERED SALES OF SECURITIES
FROM: SECURITIES AND EXCHANGE COMMISSION
SEC Charges Florida Resident with Unregistered Sales of Securities
On July 23, 2013, the Securities and Exchange Commission filed settled charges against Florida resident Jorge Bravo, Jr., for unlawful sales of millions of shares of a microcap company to the public without complying with the registration requirements of the Securities Act of 1933.
According to the SEC's complaint filed in the U.S. District Court for the Southern District of New York, from April 2009 until May 2010, Bravo unlawfully sold approximately 93 million shares of stock of AVVAA World Health Care Products, Inc. in unregistered transactions for proceeds of approximately $523,000. The complaint alleges that Bravo obtained the shares through three "wrap around agreements." The wrap around agreements involved debts that AVVAA supposedly owed to its officers, affiliates, or other persons closely associated with the company ("Affiliates") for unpaid compensation for services rendered. Under the wrap around agreements, the Affiliates assigned to Bravo the debts that AVVAA purportedly owed to them, and AVVAA consented to the assignment and agreed to modify the terms of the original debt obligation so that the debts now owed to Bravo were immediately convertible into shares of AVVAA common stock. According to the complaint, within weeks of entering into the first two agreements, and approximately four months after the execution of the third, Bravo began selling the shares he obtained under the agreements to the public. He then used some of the proceeds of the stock sales to pay the amounts owed to the Affiliates under the wrap around agreements. The complaint further alleges that Bravo had previously been involved in wrap around agreements, in his capacity as of president and chief executive of Cross Atlantic Commodities, Inc., a public company located in Weston, Florida, and that those wrap around agreements were subjects of a prior Commission enforcement action, SEC v. K&L International Enterprises, Inc., 6:09-cv-1638-GAP-KRS (M.D. Fla. Sept. 24, 2009). Bravo was not charged in that matter.
Without admitting or denying the SEC's allegations, Bravo agreed to settle the case against him by consenting to the entry of a final judgment permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act; permanently enjoining him from participating in any offering of penny stock; and requiring him to pay disgorgement of $ 392,000, the amount of his ill-gotten gains, plus prejudgment interest of $ 53,866 and a civil penalty in the amount of $150,000. The settlement must be approved by the court.
The SEC's investigation was conducted by New York Regional Office Enforcement staff Karen Lee, Christopher Ferrante, and Leslie Kazon. The Commission acknowledges the assistance of FINRA, the British Columbia Securities Commission, and the Ontario Securities Commission in this matter.
SEC Charges Florida Resident with Unregistered Sales of Securities
On July 23, 2013, the Securities and Exchange Commission filed settled charges against Florida resident Jorge Bravo, Jr., for unlawful sales of millions of shares of a microcap company to the public without complying with the registration requirements of the Securities Act of 1933.
According to the SEC's complaint filed in the U.S. District Court for the Southern District of New York, from April 2009 until May 2010, Bravo unlawfully sold approximately 93 million shares of stock of AVVAA World Health Care Products, Inc. in unregistered transactions for proceeds of approximately $523,000. The complaint alleges that Bravo obtained the shares through three "wrap around agreements." The wrap around agreements involved debts that AVVAA supposedly owed to its officers, affiliates, or other persons closely associated with the company ("Affiliates") for unpaid compensation for services rendered. Under the wrap around agreements, the Affiliates assigned to Bravo the debts that AVVAA purportedly owed to them, and AVVAA consented to the assignment and agreed to modify the terms of the original debt obligation so that the debts now owed to Bravo were immediately convertible into shares of AVVAA common stock. According to the complaint, within weeks of entering into the first two agreements, and approximately four months after the execution of the third, Bravo began selling the shares he obtained under the agreements to the public. He then used some of the proceeds of the stock sales to pay the amounts owed to the Affiliates under the wrap around agreements. The complaint further alleges that Bravo had previously been involved in wrap around agreements, in his capacity as of president and chief executive of Cross Atlantic Commodities, Inc., a public company located in Weston, Florida, and that those wrap around agreements were subjects of a prior Commission enforcement action, SEC v. K&L International Enterprises, Inc., 6:09-cv-1638-GAP-KRS (M.D. Fla. Sept. 24, 2009). Bravo was not charged in that matter.
Without admitting or denying the SEC's allegations, Bravo agreed to settle the case against him by consenting to the entry of a final judgment permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act; permanently enjoining him from participating in any offering of penny stock; and requiring him to pay disgorgement of $ 392,000, the amount of his ill-gotten gains, plus prejudgment interest of $ 53,866 and a civil penalty in the amount of $150,000. The settlement must be approved by the court.
The SEC's investigation was conducted by New York Regional Office Enforcement staff Karen Lee, Christopher Ferrante, and Leslie Kazon. The Commission acknowledges the assistance of FINRA, the British Columbia Securities Commission, and the Ontario Securities Commission in this matter.
Sunday, August 4, 2013
SECRETARY OF STATE KERRY'S STATEMENT ON THE ELECTION IN ZIMBABWE
FROM: U.S. STATE DEPARTMENT
Zimbabwe's Presidential Election
Press Statement
John Kerry
Secretary of State
Washington, DC
August 3, 2013
Zimbabweans voted in their country’s first national elections this week since the violent and disputed polls in 2008. These elections were an opportunity for Zimbabwe to move forward on a democratic path and provide a foundation for growth and prosperity.
The people of Zimbabwe should be commended for rejecting violence and showing their commitment to the democratic process. But make no mistake: in light of substantial electoral irregularities reported by domestic and regional observers, the United States does not believe that the results announced today represent a credible expression of the will of the Zimbabwean people.
Though the United States was restricted from monitoring these elections, the balance of evidence indicates that today’s announcement was the culmination of a deeply flawed process. There were irregularities in the provision and composition of the voters roll. The parties had unequal access to state media. The security sector did not safeguard the electoral process on an even-handed basis. And the government failed to implement the political reforms mandated by Zimbabwe’s new constitution, the Global Political Agreement, and the region.
We urge the Southern African Development Community and the African Union to address their concerns with the electoral process, as well as those raised by domestic monitoring groups. The Government of Zimbabwe needs to chart a way forward that will give the people of Zimbabwe the opportunity to express their most fundamental democratic right in a free and fair environment. We further call on all parties to refrain from violence during this period.
The United States shares the same fundamental interests as the Zimbabwean people: a peaceful, democratic, prosperous Zimbabwe that reflects the will of its people and provides opportunities for them to flourish. For that to happen, the Government of Zimbabwe should heed the voices of its citizens and implement the democratic reforms mandated by the country’s new constitution.
Only then will Zimbabwe truly embark on a path towards democracy that reflects the aspirations of its people.
Zimbabwe's Presidential Election
Press Statement
John Kerry
Secretary of State
Washington, DC
August 3, 2013
Zimbabweans voted in their country’s first national elections this week since the violent and disputed polls in 2008. These elections were an opportunity for Zimbabwe to move forward on a democratic path and provide a foundation for growth and prosperity.
The people of Zimbabwe should be commended for rejecting violence and showing their commitment to the democratic process. But make no mistake: in light of substantial electoral irregularities reported by domestic and regional observers, the United States does not believe that the results announced today represent a credible expression of the will of the Zimbabwean people.
Though the United States was restricted from monitoring these elections, the balance of evidence indicates that today’s announcement was the culmination of a deeply flawed process. There were irregularities in the provision and composition of the voters roll. The parties had unequal access to state media. The security sector did not safeguard the electoral process on an even-handed basis. And the government failed to implement the political reforms mandated by Zimbabwe’s new constitution, the Global Political Agreement, and the region.
We urge the Southern African Development Community and the African Union to address their concerns with the electoral process, as well as those raised by domestic monitoring groups. The Government of Zimbabwe needs to chart a way forward that will give the people of Zimbabwe the opportunity to express their most fundamental democratic right in a free and fair environment. We further call on all parties to refrain from violence during this period.
The United States shares the same fundamental interests as the Zimbabwean people: a peaceful, democratic, prosperous Zimbabwe that reflects the will of its people and provides opportunities for them to flourish. For that to happen, the Government of Zimbabwe should heed the voices of its citizens and implement the democratic reforms mandated by the country’s new constitution.
Only then will Zimbabwe truly embark on a path towards democracy that reflects the aspirations of its people.
DOD RECRUITING AND RETENTION NUMBERS FOR FISCAL 2013
FROM: U.S. DEPARTMENT OF DEFENSE
DOD Announces Recruiting and Retention Numbers for Fiscal 2013, Through June 2013
The Department of Defense announced today recruiting and retention statistics for the active and reserve components for fiscal 2013, through June.
Active Component.
Recruiting. All four active services met or exceeded their numerical accession goals for fiscal 2013, through June.
• Army – 49,273 accessions, with a goal of 48,690; 101 percent
• Navy – 28,482 accessions, with a goal of 28,482; 100 percent
• Marine Corps – 21,001 accessions, with a goal of 20,960; 100 percent
• Air Force – 20,154 accessions, with a goal of 20,154; 100 percent
Retention. The Army, Air Force, and Marine Corps exhibited strong retention numbers for the ninth month of fiscal 2013. The Navy exhibited strong retention numbers in the mid-career and career categories. However, the Navy's achievement of 89 percent in the initial category relates to reduced accessions from four to six years ago.
Reserve Component.
Recruiting. Five of the six reserve components met or exceeded their fiscal-year-to-date 2013 numerical accession goals. The Army Reserve finished June 2,572 accessions short of its goal.
• Army National Guard – 38,002 accessions, with a goal of 37,669; 101 percent
• Army Reserve – 19,779 accessions, with a goal of 22,351; 88 percent
• Navy Reserve – 4,138 accessions, with a goal of 4,138; 100 percent
• Marine Corps Reserve – 6,891 accessions, with a goal of 6,804; 101 percent
• Air National Guard – 7,788 accessions, with a goal of 7,788; 100 percent
• Air Force Reserve – 5,515 accessions, with a goal of 4,835; 114 percent
Attrition – All Reserve Components have met their attrition goals. Current trends are expected to continue. (This indicator lags by one month due to data availability.)
DOD Announces Recruiting and Retention Numbers for Fiscal 2013, Through June 2013
The Department of Defense announced today recruiting and retention statistics for the active and reserve components for fiscal 2013, through June.
Active Component.
Recruiting. All four active services met or exceeded their numerical accession goals for fiscal 2013, through June.
• Army – 49,273 accessions, with a goal of 48,690; 101 percent
• Navy – 28,482 accessions, with a goal of 28,482; 100 percent
• Marine Corps – 21,001 accessions, with a goal of 20,960; 100 percent
• Air Force – 20,154 accessions, with a goal of 20,154; 100 percent
Retention. The Army, Air Force, and Marine Corps exhibited strong retention numbers for the ninth month of fiscal 2013. The Navy exhibited strong retention numbers in the mid-career and career categories. However, the Navy's achievement of 89 percent in the initial category relates to reduced accessions from four to six years ago.
Reserve Component.
Recruiting. Five of the six reserve components met or exceeded their fiscal-year-to-date 2013 numerical accession goals. The Army Reserve finished June 2,572 accessions short of its goal.
• Army National Guard – 38,002 accessions, with a goal of 37,669; 101 percent
• Army Reserve – 19,779 accessions, with a goal of 22,351; 88 percent
• Navy Reserve – 4,138 accessions, with a goal of 4,138; 100 percent
• Marine Corps Reserve – 6,891 accessions, with a goal of 6,804; 101 percent
• Air National Guard – 7,788 accessions, with a goal of 7,788; 100 percent
• Air Force Reserve – 5,515 accessions, with a goal of 4,835; 114 percent
Attrition – All Reserve Components have met their attrition goals. Current trends are expected to continue. (This indicator lags by one month due to data availability.)
TELEMARKETER BANNED FROM SELLING DEBT RELIEF SERVICES
FROM: FEDERAL TRADING COMMISSION
FTC Settlement Bans Marketer from Selling Debt Relief Services, Telemarketing, and Robocalling
Under a settlement with the Federal Trade Commission, a telemarketer who allegedly defrauded consumers with false promises of debt relief and charged them without their consent is banned from selling debt relief services, telemarketing, and making robocalls.
The settlement resolves a complaint the FTC filed last year against Jeremy R. Nelson and four companies he controlled. The agency alleged that they violated federal law by making false claims, causing unauthorized debits from consumers’ bank accounts, and illegally charging advance fees.
The FTC also alleged that the defendants called phone numbers on the National Do Not Call Registry, called consumers who had told them not to call, failed to transmit caller identification to consumers’ caller ID service, delivered pre-recorded messages without prior written consent, repeatedly called consumers to annoy them, and delivered pre-recorded messages that failed to identify the seller, the call’s purpose, and the product or service.
In addition to the ban on debt relief sales, telemarketing, and robocalls, the proposed settlement order permanently prohibits the defendants from misrepresenting material facts about any products and services, making unsubstantiated claims, charging consumers’ accounts without their express informed consent, collecting money from customers who agreed to purchase debt relief products or services from the defendants, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.
The order imposes a judgment of more than $4.6 million against the defendants. The judgment against Nelson will be suspended, based on his inability to pay, after he surrenders to the FTC bank accounts and investment assets frozen by the court. The full judgment will become due immediately if he is found to have misrepresented his financial condition.
For information on dealing with debt, read the FTC’s Knee Deep In Debt.
The Commission vote authorizing the staff to file the proposed consent order was 4-0. The consent order was filed in the U.S. District Court for the Central District of California.
NOTE: Consent orders have the force of law when approved and signed by the District Court judge.
FTC Settlement Bans Marketer from Selling Debt Relief Services, Telemarketing, and Robocalling
Under a settlement with the Federal Trade Commission, a telemarketer who allegedly defrauded consumers with false promises of debt relief and charged them without their consent is banned from selling debt relief services, telemarketing, and making robocalls.
The settlement resolves a complaint the FTC filed last year against Jeremy R. Nelson and four companies he controlled. The agency alleged that they violated federal law by making false claims, causing unauthorized debits from consumers’ bank accounts, and illegally charging advance fees.
The FTC also alleged that the defendants called phone numbers on the National Do Not Call Registry, called consumers who had told them not to call, failed to transmit caller identification to consumers’ caller ID service, delivered pre-recorded messages without prior written consent, repeatedly called consumers to annoy them, and delivered pre-recorded messages that failed to identify the seller, the call’s purpose, and the product or service.
In addition to the ban on debt relief sales, telemarketing, and robocalls, the proposed settlement order permanently prohibits the defendants from misrepresenting material facts about any products and services, making unsubstantiated claims, charging consumers’ accounts without their express informed consent, collecting money from customers who agreed to purchase debt relief products or services from the defendants, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.
The order imposes a judgment of more than $4.6 million against the defendants. The judgment against Nelson will be suspended, based on his inability to pay, after he surrenders to the FTC bank accounts and investment assets frozen by the court. The full judgment will become due immediately if he is found to have misrepresented his financial condition.
For information on dealing with debt, read the FTC’s Knee Deep In Debt.
The Commission vote authorizing the staff to file the proposed consent order was 4-0. The consent order was filed in the U.S. District Court for the Central District of California.
NOTE: Consent orders have the force of law when approved and signed by the District Court judge.
WYETH PHARMACEUTICALS AGREES TO PAY $490.9 MILLION FOR MARKETING DRUG FOR UNAPPROVED USES
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, July 30, 2013
Wyeth Pharmaceuticals Agrees to Pay $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses
Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer, Inc. in 2009, has agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drug Rapamune for uses not approved as safe and effective by the U.S. Food and Drug Administration (FDA), the Justice Department announced today. Rapamune is an “immunosuppressive” drug that prevents the body’s immune system from rejecting a transplanted organ.
“FDA’s drug approval process ensures companies market their products for uses proven safe and effective,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “We will hold accountable those who put patients’ health at risk in pursuit of financial gain.”
The Federal Food, Drug and Cosmetic Act (FDCA) requires a company such as Wyeth to specify the intended uses of a product in its new drug application to the FDA. Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses. In 1999, Wyeth received approval from the FDA for Rapamune use in renal (kidney) transplant patients. However, the information alleges, Wyeth trained its national Rapamune sales force to promote the use of the drug in non-renal transplant patients. Wyeth provided the sales force with training materials regarding non-renal transplant use and trained them on how to use these materials in presentations to transplant physicians. Then, Wyeth encouraged sales force members, through financial incentives, to target all transplant patient populations to increase Rapamune sales.
“The FDA approves drugs for certain uses after lengthy clinical trials,” said Sanford Coats, U.S. Attorney for the Western District of Oklahoma. “Compliance with these approved uses is important to protect patient safety, and drug companies must only market and promote their drugs for FDA-approved uses. The FDA approved Rapamune for limited use in renal transplants and required the label to include a warning against certain uses. Yet, Wyeth trained its sales force to promote Rapamune for off-label uses not approved by the FDA, including ex-renal uses, and even paid bonuses to incentivize those sales. This was a systemic, corporate effort to seek profit over safety. Companies that ignore compliance with FDA regulations will face criminal prosecution and stiff penalties.”
Wyeth has pleaded guilty to a criminal information charging it with a misbranding violation under the FDCA. The resolution includes a criminal fine and forfeiture totaling $233.5 million. Under a plea agreement, which has been accepted by the U.S. District Court in Oklahoma City, Wyeth has agreed to pay a criminal fine of $157.58 million and forfeit assets of $76 million.
The resolution also includes civil settlements with the federal government and the states totaling $257.4 million. Wyeth has agreed to settle its potential civil liability in connection with its off-label marketing of Rapamune. The government alleged that Wyeth violated the False Claims Act, from 1998 through 2009, by promoting Rapamune for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by Medicare, Medicaid and other federal health care programs. These unapproved uses included non-renal transplants, conversion use (switching a patient from another immunosuppressant to Rapamune) and using Rapamune in combination with other immunosuppressive agents not listed on the label. The government alleged that this conduct resulted in the submission of false claims to government health care programs. Of the amounts to resolve the civil claims, Wyeth will pay $230,112,596 to the federal government and $27,287,404 to the states.
“Wyeth’s conduct put profits ahead of the health and safety of a highly vulnerable patient population dependent on life-sustaining therapy,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. “FDA OCI is committed to working with the Department of Justice and our law enforcement counterparts to protect public health.”
Pfizer is currently subject to a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services’ Office of Inspector General that it entered in connection with another matter in 2009, shortly before acquiring Wyeth. The CIA covers former Wyeth employees who now perform sales and marketing functions at Pfizer. Under the CIA, Pfizer is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA, and the company is subject to monetary penalties for less significant breaches.
“We are committed to enforcing the laws protecting public health, taxpayers and government health programs, and to promoting effective compliance programs,” said Daniel R. Levinson, Inspector General, Department of Health and Human Services. “Our integrity agreement with Pfizer, which acquired Wyeth, includes required risk assessments, a confidential disclosure program, and auditing and monitoring to help prospectively identify improper marketing.”
The civil settlement resolves two lawsuits pending in federal court in the Western District of Oklahoma under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and share in any recovery. The first action was filed by a former Rapamune sales representative, Marlene Sandler, and a pharmacist, Scott Paris. The second action was filed by a former Rapamune sales representative, Mark Campbell. The whistleblowers’ share of the civil settlement has not been resolved.
"The success obtained in this case is an excellent example of how we address the threats to our nation’s health care system; the importance of the public reporting of fraud, waste, or abuse; and the significant results that can be obtained through multiple agencies cooperating in investigations,” said James E. Finch, Special Agent in Charge of the Oklahoma City Division of the FBI.
The criminal case was handled by the U.S. Attorney’s Office for the Western District of Oklahoma (USAO) and the Justice Department’s Civil Division, Consumer Protection Branch. The civil settlement was handled by USAO and the Justice Department’s Civil Division, Commercial Litigation Branch. The Department of Health and Human Services’ (HHS) Office of Counsel to the Inspector General; the HHS Office of General Counsel, Center for Medicare and Medicaid Services; the FDA’s Office of Chief Counsel; and the National Association of Medicaid Fraud Control Units. These matters were investigated by the FBI; the FDA’s Office of Criminal Investigation; HHS’ Office of Inspector General, Office of Investigations and Office of Audit Services; the Defense Criminal Investigative Service; the Office of Personnel Management’s Office of Inspector General and Office of Audit Services; the Department of Veterans’ Affairs’ Office of Inspector General; and TRICARE Program Integrity.
Except for conduct admitted in connection with the criminal plea, the claims settled by the civil agreement are allegations only, and there has been no determination of civil liability. The civil lawsuits are captioned United States ex rel. Sandler et al v. Wyeth Pharmaceuticals, Inc., Case No. 05-6609 (E.D. Pa.) and United States ex rel. Campbell v. Wyeth, Inc., Case No. 07-00051 (W.D. Okla.).
Tuesday, July 30, 2013
Wyeth Pharmaceuticals Agrees to Pay $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses
Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer, Inc. in 2009, has agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drug Rapamune for uses not approved as safe and effective by the U.S. Food and Drug Administration (FDA), the Justice Department announced today. Rapamune is an “immunosuppressive” drug that prevents the body’s immune system from rejecting a transplanted organ.
“FDA’s drug approval process ensures companies market their products for uses proven safe and effective,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “We will hold accountable those who put patients’ health at risk in pursuit of financial gain.”
The Federal Food, Drug and Cosmetic Act (FDCA) requires a company such as Wyeth to specify the intended uses of a product in its new drug application to the FDA. Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses. In 1999, Wyeth received approval from the FDA for Rapamune use in renal (kidney) transplant patients. However, the information alleges, Wyeth trained its national Rapamune sales force to promote the use of the drug in non-renal transplant patients. Wyeth provided the sales force with training materials regarding non-renal transplant use and trained them on how to use these materials in presentations to transplant physicians. Then, Wyeth encouraged sales force members, through financial incentives, to target all transplant patient populations to increase Rapamune sales.
“The FDA approves drugs for certain uses after lengthy clinical trials,” said Sanford Coats, U.S. Attorney for the Western District of Oklahoma. “Compliance with these approved uses is important to protect patient safety, and drug companies must only market and promote their drugs for FDA-approved uses. The FDA approved Rapamune for limited use in renal transplants and required the label to include a warning against certain uses. Yet, Wyeth trained its sales force to promote Rapamune for off-label uses not approved by the FDA, including ex-renal uses, and even paid bonuses to incentivize those sales. This was a systemic, corporate effort to seek profit over safety. Companies that ignore compliance with FDA regulations will face criminal prosecution and stiff penalties.”
Wyeth has pleaded guilty to a criminal information charging it with a misbranding violation under the FDCA. The resolution includes a criminal fine and forfeiture totaling $233.5 million. Under a plea agreement, which has been accepted by the U.S. District Court in Oklahoma City, Wyeth has agreed to pay a criminal fine of $157.58 million and forfeit assets of $76 million.
The resolution also includes civil settlements with the federal government and the states totaling $257.4 million. Wyeth has agreed to settle its potential civil liability in connection with its off-label marketing of Rapamune. The government alleged that Wyeth violated the False Claims Act, from 1998 through 2009, by promoting Rapamune for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by Medicare, Medicaid and other federal health care programs. These unapproved uses included non-renal transplants, conversion use (switching a patient from another immunosuppressant to Rapamune) and using Rapamune in combination with other immunosuppressive agents not listed on the label. The government alleged that this conduct resulted in the submission of false claims to government health care programs. Of the amounts to resolve the civil claims, Wyeth will pay $230,112,596 to the federal government and $27,287,404 to the states.
“Wyeth’s conduct put profits ahead of the health and safety of a highly vulnerable patient population dependent on life-sustaining therapy,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. “FDA OCI is committed to working with the Department of Justice and our law enforcement counterparts to protect public health.”
Pfizer is currently subject to a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services’ Office of Inspector General that it entered in connection with another matter in 2009, shortly before acquiring Wyeth. The CIA covers former Wyeth employees who now perform sales and marketing functions at Pfizer. Under the CIA, Pfizer is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA, and the company is subject to monetary penalties for less significant breaches.
“We are committed to enforcing the laws protecting public health, taxpayers and government health programs, and to promoting effective compliance programs,” said Daniel R. Levinson, Inspector General, Department of Health and Human Services. “Our integrity agreement with Pfizer, which acquired Wyeth, includes required risk assessments, a confidential disclosure program, and auditing and monitoring to help prospectively identify improper marketing.”
The civil settlement resolves two lawsuits pending in federal court in the Western District of Oklahoma under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and share in any recovery. The first action was filed by a former Rapamune sales representative, Marlene Sandler, and a pharmacist, Scott Paris. The second action was filed by a former Rapamune sales representative, Mark Campbell. The whistleblowers’ share of the civil settlement has not been resolved.
"The success obtained in this case is an excellent example of how we address the threats to our nation’s health care system; the importance of the public reporting of fraud, waste, or abuse; and the significant results that can be obtained through multiple agencies cooperating in investigations,” said James E. Finch, Special Agent in Charge of the Oklahoma City Division of the FBI.
The criminal case was handled by the U.S. Attorney’s Office for the Western District of Oklahoma (USAO) and the Justice Department’s Civil Division, Consumer Protection Branch. The civil settlement was handled by USAO and the Justice Department’s Civil Division, Commercial Litigation Branch. The Department of Health and Human Services’ (HHS) Office of Counsel to the Inspector General; the HHS Office of General Counsel, Center for Medicare and Medicaid Services; the FDA’s Office of Chief Counsel; and the National Association of Medicaid Fraud Control Units. These matters were investigated by the FBI; the FDA’s Office of Criminal Investigation; HHS’ Office of Inspector General, Office of Investigations and Office of Audit Services; the Defense Criminal Investigative Service; the Office of Personnel Management’s Office of Inspector General and Office of Audit Services; the Department of Veterans’ Affairs’ Office of Inspector General; and TRICARE Program Integrity.
Except for conduct admitted in connection with the criminal plea, the claims settled by the civil agreement are allegations only, and there has been no determination of civil liability. The civil lawsuits are captioned United States ex rel. Sandler et al v. Wyeth Pharmaceuticals, Inc., Case No. 05-6609 (E.D. Pa.) and United States ex rel. Campbell v. Wyeth, Inc., Case No. 07-00051 (W.D. Okla.).
SEC ANNOUNCES INSIDER TRADING CHARGES AGAINST SYSTEMS ADMINISTRATOR AT GREEN MOUNTAIN COFFEE ROASTERS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him.
In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis of Morrisville, Vermont purchased Green Mountain securities - typically out-of-the-money options - shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach of Hamden, Connecticut, who illegally traded in his own account and his mother's trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain's stock price to 12 of the past 13 quarterly earnings announcements since 2010.
The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain's computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees' e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain earnings announcements before they became public.
The SEC's complaint was filed under seal on July 24, when the court granted the Commission's motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7.
The SEC's complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach's mother Bella Pugach is named as a relief defendant in the SEC's complaint for the purpose of recovering ill-gotten gains in her trading account.
The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency.
The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him.
In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis of Morrisville, Vermont purchased Green Mountain securities - typically out-of-the-money options - shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach of Hamden, Connecticut, who illegally traded in his own account and his mother's trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain's stock price to 12 of the past 13 quarterly earnings announcements since 2010.
The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain's computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees' e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain earnings announcements before they became public.
The SEC's complaint was filed under seal on July 24, when the court granted the Commission's motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7.
The SEC's complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach's mother Bella Pugach is named as a relief defendant in the SEC's complaint for the purpose of recovering ill-gotten gains in her trading account.
The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency.
THREE SENTENCED IN PUERTO RICO IN OPERATION GUARD SHACK DRUG SECURITY PROSECUTION
FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, July 31, 2013
Three Men Sentenced in Puerto Rico in Operation Guard Shack Prosecution
131 Defendants Have Pleaded Guilty or Been Convicted After Trial
Two former officers with the Police of Puerto Rico and another individual were sentenced to prison late yesterday for their roles in providing security for drug transactions.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI’s San Juan Field Office made the announcement after sentencing by U.S. District Judge Carmen Consuelo Cerezo in the District of Puerto Rico.
Former Police of Puerto Rico officers Daviel Salinas-Acevedo, 29, of Bayamon, Puerto Rico, and Miguel Santiago-Cordero, 30, of Lares, Puerto Rico, were each sentenced on July 30, 2013, to serve 181 months in prison. In addition, Wendell Rivera-Ruperto, 38, of Las Marias, Puerto Rico, was also sentenced yesterday to 420 months in prison.
On Jan. 10, 2013, Salinas-Acevedo and Santiago-Cordero were each convicted at trial of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine and one count of possessing a firearm in furtherance of a drug transaction. Rivera-Ruperto was convicted of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine, attempting to possess with the intent to distribute more than five kilograms of cocaine and possessing a firearm in furtherance of a drug transaction. Rivera-Ruperto had been convicted previously of 15 other counts arising from his participation in other, related drug transactions.
The case against the three defendants arose from the FBI’s undercover operation known as “Operation Guard Shack.” To date, 131 defendants have pleaded guilty or been convicted at trial, and 123 defendants have been sentenced as a result of the operation.
According to the evidence presented in court, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each provided security for what they believed were illegal cocaine deals that occurred on March 24, April 9 and July 8, 2010, respectively. In fact, each purported drug transaction was one of dozens of simulated transactions conducted as part of the undercover FBI operation. The three men performed armed security for the multi-kilogram cocaine deals by frisking the buyer, standing guard as the kilos were counted and inspecting and escorting the buyer in and out of the transaction.
In return for the security they provided, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each received a cash payment of $2,000. The money was never returned by any of the defendants, and none of the defendants ever reported the transactions.
The case was investigated by the FBI. The Puerto Rico Department of Justice also provided assistance in this case.
The case was prosecuted by Trial Attorneys Anthony J. Phillips and Edward J. Loya Jr. of the Criminal Division’s Public Integrity Section. The U.S. Attorney’s Office for the District of Puerto Rico participated in the investigation and prosecution of this case.
Wednesday, July 31, 2013
Three Men Sentenced in Puerto Rico in Operation Guard Shack Prosecution
131 Defendants Have Pleaded Guilty or Been Convicted After Trial
Two former officers with the Police of Puerto Rico and another individual were sentenced to prison late yesterday for their roles in providing security for drug transactions.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI’s San Juan Field Office made the announcement after sentencing by U.S. District Judge Carmen Consuelo Cerezo in the District of Puerto Rico.
Former Police of Puerto Rico officers Daviel Salinas-Acevedo, 29, of Bayamon, Puerto Rico, and Miguel Santiago-Cordero, 30, of Lares, Puerto Rico, were each sentenced on July 30, 2013, to serve 181 months in prison. In addition, Wendell Rivera-Ruperto, 38, of Las Marias, Puerto Rico, was also sentenced yesterday to 420 months in prison.
On Jan. 10, 2013, Salinas-Acevedo and Santiago-Cordero were each convicted at trial of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine and one count of possessing a firearm in furtherance of a drug transaction. Rivera-Ruperto was convicted of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine, attempting to possess with the intent to distribute more than five kilograms of cocaine and possessing a firearm in furtherance of a drug transaction. Rivera-Ruperto had been convicted previously of 15 other counts arising from his participation in other, related drug transactions.
The case against the three defendants arose from the FBI’s undercover operation known as “Operation Guard Shack.” To date, 131 defendants have pleaded guilty or been convicted at trial, and 123 defendants have been sentenced as a result of the operation.
According to the evidence presented in court, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each provided security for what they believed were illegal cocaine deals that occurred on March 24, April 9 and July 8, 2010, respectively. In fact, each purported drug transaction was one of dozens of simulated transactions conducted as part of the undercover FBI operation. The three men performed armed security for the multi-kilogram cocaine deals by frisking the buyer, standing guard as the kilos were counted and inspecting and escorting the buyer in and out of the transaction.
In return for the security they provided, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each received a cash payment of $2,000. The money was never returned by any of the defendants, and none of the defendants ever reported the transactions.
The case was investigated by the FBI. The Puerto Rico Department of Justice also provided assistance in this case.
The case was prosecuted by Trial Attorneys Anthony J. Phillips and Edward J. Loya Jr. of the Criminal Division’s Public Integrity Section. The U.S. Attorney’s Office for the District of Puerto Rico participated in the investigation and prosecution of this case.
STOCK PROMOTER TO PAY OVER $1.6 MILLION FOR INFORMATION ISSUED IN PENNY STOCK PUBLICATIONS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Massachusetts-Based Penny Stock Promoter Ordered to Pay Over $1.6 Million in Penny Stock Fraud Case
The Securities and Exchange Commission announced today that on July 24, 2013, a final judgment was entered by default against Massachusetts-based National Financial Communications, Inc. ("NFC"). NFC is a defendant in an action filed by the Commission in the U.S. District Court for the District of Massachusetts on December 12, 2011, alleging that Massachusetts resident Geoffrey J. Eiten and NFC made material misrepresentations and omissions in penny stock publications they issued.
The judgment enjoins NFC from further violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder) and from certain specified activities related to penny stocks, including the promotion of a penny stock or deriving compensation from the promotion of a penny stock. The judgment also imposed a penny stock bar against NFC which permanently bars it from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purpose of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. The judgment orders NFC to pay disgorgement of $605,262, representing NFC's ill-gotten gains, plus prejudgment interest of $38,819 and a civil penalty of $1 million.
The Commission's complaint alleged that Eiten and NFC issued a penny stock promotional publication called the "OTC Special Situations Reports." According to the complaint, the defendants promoted penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleged that Eiten and NFC made misrepresentations in these reports about the penny stock companies they promoted. For example, the Commission's complaint alleged that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission's complaint alleged that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies' financial condition, future revenue projections, intellectual property rights, and Eiten's interaction with company management as a basis for his statements.
According to the complaint, Eiten and NFC were hired to issue the above reports and used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true.
Massachusetts-Based Penny Stock Promoter Ordered to Pay Over $1.6 Million in Penny Stock Fraud Case
The Securities and Exchange Commission announced today that on July 24, 2013, a final judgment was entered by default against Massachusetts-based National Financial Communications, Inc. ("NFC"). NFC is a defendant in an action filed by the Commission in the U.S. District Court for the District of Massachusetts on December 12, 2011, alleging that Massachusetts resident Geoffrey J. Eiten and NFC made material misrepresentations and omissions in penny stock publications they issued.
The judgment enjoins NFC from further violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder) and from certain specified activities related to penny stocks, including the promotion of a penny stock or deriving compensation from the promotion of a penny stock. The judgment also imposed a penny stock bar against NFC which permanently bars it from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purpose of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. The judgment orders NFC to pay disgorgement of $605,262, representing NFC's ill-gotten gains, plus prejudgment interest of $38,819 and a civil penalty of $1 million.
The Commission's complaint alleged that Eiten and NFC issued a penny stock promotional publication called the "OTC Special Situations Reports." According to the complaint, the defendants promoted penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleged that Eiten and NFC made misrepresentations in these reports about the penny stock companies they promoted. For example, the Commission's complaint alleged that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission's complaint alleged that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies' financial condition, future revenue projections, intellectual property rights, and Eiten's interaction with company management as a basis for his statements.
According to the complaint, Eiten and NFC were hired to issue the above reports and used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true.
Saturday, August 3, 2013
FTC ANNOUNCES COURT ORDER HALTING DEBT COLLECTORS ILLEGAL PRACTICES
FROM: FEDERAL TRADE COMMISSION
At FTC's Request, Court Orders Halt to Debt Collector's Illegal Practices, Freezes Assets
Defendants Allegedly Broke the Law by Posing as Process Servers, Threatening Lawsuits, and Contacting Consumers’ Employers and Family Members in Violation of Their Privacy.
At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly extorted payments from consumers by using false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers. The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.
The lawsuit, part of the FTC’s continuing crackdown on scams that target consumers in financial distress, charged four individuals and seven companies. The FTC alleged that the defendants were part of an elaborate debt collection scheme operating from locations in Orange and Riverside counties in California, and that they used various business names including Western Performance Group, as well as fictitious names, which they changed frequently to avoid law enforcement scrutiny.
The FTC alleged that the defendants called consumers and their employers, colleagues, and family members posing as process servers or law office employees, and claimed they were seeking to deliver legal papers that purportedly related to a lawsuit. In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls. But the debt collectors were not process servers or law office employees, and the defendants did not file lawsuits against the consumers. The FTC charged that the defendants’ false and misleading claims violated the FTC Act and the Fair Debt Collection Practices Act. In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:
improperly contacting third parties about consumers’ debts; failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and failing to notify consumers of their right to dispute and obtain verification of their debts.
The complaint names as defendantsThai Han; Jim Tran Phelps; Keith Hua; James Novella; One FC, LLC, also doing business as Western Performance Group and WPG; Credit MP, LLC, also doing business as AFGA, CMP, AFG & Associates, AF Group, Allied Financial Group, and Allied Guarantee Financial; Western Capital Group, Inc., also doing business as ERA, LMR, WCG, and WC Group; SJ Capitol LLC, also doing business as SCG; Green Fidelity Allegiance, Inc., also doing business as WRA; Asset and Capital Management Group; and Crown Funding Company, LLC.
The Commission vote authorizing the staff to file the complaint was 4-0. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California. On July 24, 2013, the court granted the FTC’s request for a temporary restraining order. The Federal Trade Commission would like to thank the U.S. Postal Inspection Service for its assistance in bringing this case.
At FTC's Request, Court Orders Halt to Debt Collector's Illegal Practices, Freezes Assets
Defendants Allegedly Broke the Law by Posing as Process Servers, Threatening Lawsuits, and Contacting Consumers’ Employers and Family Members in Violation of Their Privacy.
At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly extorted payments from consumers by using false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers. The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.
The lawsuit, part of the FTC’s continuing crackdown on scams that target consumers in financial distress, charged four individuals and seven companies. The FTC alleged that the defendants were part of an elaborate debt collection scheme operating from locations in Orange and Riverside counties in California, and that they used various business names including Western Performance Group, as well as fictitious names, which they changed frequently to avoid law enforcement scrutiny.
The FTC alleged that the defendants called consumers and their employers, colleagues, and family members posing as process servers or law office employees, and claimed they were seeking to deliver legal papers that purportedly related to a lawsuit. In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls. But the debt collectors were not process servers or law office employees, and the defendants did not file lawsuits against the consumers. The FTC charged that the defendants’ false and misleading claims violated the FTC Act and the Fair Debt Collection Practices Act. In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:
improperly contacting third parties about consumers’ debts; failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and failing to notify consumers of their right to dispute and obtain verification of their debts.
The complaint names as defendantsThai Han; Jim Tran Phelps; Keith Hua; James Novella; One FC, LLC, also doing business as Western Performance Group and WPG; Credit MP, LLC, also doing business as AFGA, CMP, AFG & Associates, AF Group, Allied Financial Group, and Allied Guarantee Financial; Western Capital Group, Inc., also doing business as ERA, LMR, WCG, and WC Group; SJ Capitol LLC, also doing business as SCG; Green Fidelity Allegiance, Inc., also doing business as WRA; Asset and Capital Management Group; and Crown Funding Company, LLC.
The Commission vote authorizing the staff to file the complaint was 4-0. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California. On July 24, 2013, the court granted the FTC’s request for a temporary restraining order. The Federal Trade Commission would like to thank the U.S. Postal Inspection Service for its assistance in bringing this case.
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